THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014 (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN. 

23 June 2022

ADM Energy PLC  

("ADM", the "Group" or the "Company")  

Full Year Results

ADM Energy PLC (AIM: ADME; BER and FSE: P4JC), a natural resources investing company, announces its audited full year results for the 12 months ended 31 December 2021.

Investment Highlights

Aje Field, OML 113

·      First full year of increased interest in the Aje Field, Nigeria (ADM increased its equity investment from 5% to 9.2% in December 2020)

·      Total oil production in 2021 of 407,705 bbls and barrels of oil per day of 1,117 bopd 103 bopd net to ADM)

·      Completed the 15^th and 16^th liftings at the Aje Field in April and October 2021 for a total of 457,379 barrels with a net share of 49,099

Barracuda Field, OML 141

·      Acquired an indirect interest in a Risk Sharing Agreement ("RSA") for the development of the Barracuda Field. Subsequently, commissioned a Competent Person's Report ("CPR") by Xodus on the Barracuda Field

·      Post-period announced the result of the CPR on the Barracuda prospect with a 2U (P50) case, the NPV10 is +$99mm with an IRR of 45%

Disposal of interest

·      Disposed of 188,778 shares in Superdielectrics Ltd ("Superdielectrics") for a total consideration of £849,501, which provided a profit of £656,000 on ADM's original investment

Financial and Corporate Highlights

·      Revenue increased by 125% to £1.8m (2020: £0.8m), reflecting a recovery in the oil price and ADM's increased profit interest in the Aje Field

·      Loss after tax decreased 64% to £2.5m (2020: £6.9m loss)

·      Completed an oversubscribed fundraising of £1,220,000 in March 2021, and raised an additional £475,000 in November 2021

·      Appointed Oliver Andrews, former Chief Investment Officer at the Africa Finance Corporation, as Non-executive Chairman and Dr Babatunde Pearse, as Chief Engineer on the Aje Development to oversee the next phase of Aje development

·      Post period, in January 2022, the Company completed an equity fundraising of approximately £561,000 with Optima Resources Limited

Osamede Okhomina, CEO of ADM Energy, said: "2021 was a good year of progress for ADM Energy. It was our first full year since almost doubling our interest in the Aje Field which helped achieve a significant increase in revenues over the previous year.  We also completed an acquisition giving us indirect interest in the Barracuda field, strengthening our foothold in West Africa. 

"2022 is set to be an important year for the development of Aje with PetroNor expected to take a significant stake in the asset demonstrating a commitment and confidence of the potential of Aje. With PetroNor on board, the partners can push ahead with development plans to increase production at Aje.

"In parallel to Aje and Barracuda, we continue to target the acquisition of undervalued 2P reserves that can be added to our investment portfolio and have had encouraging discussions with potential partners regarding various opportunities. It remains a buyers' market as majors look to divest non-core projects presenting opportunities for companies such as ADM who have the network, expertise, and access to capital to progress projects that can potentially bring significant value creation for shareholders."

Enquiries:

About ADM Energy PLC

ADM Energy PLC (AIM: ADME; BER and FSE: P4JC) is a natural resources investing company with an existing asset base in Nigeria. ADM Energy holds a 9.2% profit interest in the oil producing Aje Field, part of OML 113, which covers an area of 835km² offshore Nigeria. Aje has multiple oil, gas, and gas condensate reservoirs in the Turonian, Cenomanian and Albian sandstones with five wells drilled to date.

ADM Energy is seeking to build on its existing asset base in Nigeria and target other investment opportunities across the West African region in the oil and gas sector with attractive risk reward profiles such as proven nature of reserves, level of historic investment, established infrastructure and route to early cash flow.

Operating Review

2021 was an important year of progress for ADM Energy. It marks the first full year since the Company consolidated its position in the Aje Field OML 113, expanding ADM's profit interest from 5% to 9.2%. The Company announced the 15th and 16th liftings at the Aje Field for a total of 457,379 barrels with a net share of 49,099.

For the full year, revenue increased by 125% to £1.8 million (2020: £0.8 million) reflecting the first two liftings at the Aje Field since the Company increased its interest in Aje alongside a recovery in oil prices in 2021.

Alongside Aje, the Company entered 2021 with a strategy to continue to pursue high-quality assets, with attractive risk-reward profiles, and successfully completed the acquisition of an indirect interest for the large-scale Barracuda Field in OML 141.

ADM also welcomed Oliver Andrews as Non-executive Chairman and strengthened the team's technical expertise with the appointment of industry veteran Dr Babatunde Pearse as Chief Engineer on the Aje Development. 

OML 113 - Aje Field

The Aje Field on OML 113 offshore Nigeria is an oil producing asset which is rich in gas and condensate reserves. It is strategically located 24km offshore Lagos where it benefits from increasing local energy demand, particularly for gas, which is viewed as a replacement fuel for diesel and commands a premium. The field is also within close proximity to the West African Gas Pipeline which presents a potential opportunity for gas monetisation in neighbouring countries such as Benin and Togo.

Oil Production:

This is the first full year since the Company announced the completion of the transaction with EER (Colobos) Nigeria Limited ("EER") in December 2020 benefitting from an increased 9.2% profit interest in the field, nearly doubling ADM's share of revenue, reserves and net production.

During the period, oil production continued from the Aje Field (Aje-4 and Aje-5) at an average of 1,117 bopd (FY 2020: 1909). Total gross production volume amounted to approximately 407,705 barrels of oil. As stated previously, the drop in volume reflects the decision by the Joint Venture Partners ("JV Partners") to continue a more thorough and extended period of maintenance on the Floating Production Storage and Offloading ("FPSO") while oil prices were depressed at the beginning of the year and due to limited gas handling capacity of the FPSO.

The Company announced the 15th and 16th liftings at the Aje Field in April and October 2021 for a total of 457,379 barrels with a net share of 49,099. These were the first liftings since the Company consolidated its interest in the asset. The proceeds of the liftings were applied against the project debt, contributing to a reduction in the outstanding balance and the JV Partners anticipate further liftings in 2022.

The JV Partners have assessed that the current FPSO is not suitable for the long-term development plans for OML-113 and are progressing plans to replace the current FPSO to increase capacity.  As a result, the JV Partners declined to commit to a long-term extension of the current FPSO contract and the current FPSO operator will stop production in preparation for demobilisation from the field. This temporary suspension is a necessary step to ensure future production is not limited by FPSO capacity and production issues. The JV Partners are working towards securing an optimum FPSO that will match plans to significantly increase production from the redevelopment of the Aje field and the Company will update the market in due course.

A crucial step forward in the future development of Aje came post period in January 2022 when Panoro Energy ASA ("Panoro") and PetroNor E&P Limited ("PetroNor") announced that the transaction for Panoro to sell 10% of its ownership to PetroNor (the "Transaction") had received all government approvals. PetroNor and Panoro are progressing the final stages and have agreed a long-stop date to complete the transaction at 30 June 2022. PetroNor's decision to take a significant stake in the Aje field is a strong endorsement of the potential of the asset. 

The expected completion of the Transaction will accelerate the JV Partners Final Investment Decision on the long-term field development plans for the Aje Field and PetroNor's experience in development and production will play a key role in the next phase of Aje's development. The Field Development Plan, which includes the potential drilling of three new wells, could significantly increase production of oil and gas liquids at a time nations around the world are seeking new sources of oil and gas. Chief Engineer on the Aje Development, Dr Babatunde Pearse, who has an IOC background and extensive industry experience will lead the planning, development and oversee Front End Engineering Design ("FEED") studies to support the Final Investment Decision.

Barracuda

In April 2021, ADM completed the acquisition of an indirect interest in a Risk Sharing Agreement ("RSA") for the development of the Barracuda Field. Located in OML 141, the Barracuda Field is an existing discovery asset which covers 103km² in the swamp/shallow waters of the Niger Delta.

In May 2021, the Company commissioned Xodus Group Limited ("Xodus"), an independent, international energy consultancy, to prepare a CPR on the field which was completed in March 2022. Xodus calculated gross, unrisked Prospective Resources for the RSA using standard geological and engineering approaches applied to the data made available by ADM.

The CPR demonstrated the prospect of Barracuda as prospective and robust for development, assuming at least 70mmbbl Stock tank oil initially in place ("STOIIP") is discovered, with a 2U (P50) case, the NPV10 is +$99 million with an IRR of 45%.

The findings from the CPR provide a solid foundation to continue towards the next stage of technical review which will include subsurface analysis and gaining more analogue data from neighbouring fields to better understand the trap mechanisms.

The Company will use the findings from the CPR and any additional work required to further appraise the asset and make an investment decision.

Interim Injunction

As announced in November 2021, K.O.N.H. (UK) Ltd ("KONH") was notified by Noble Hill-Network Limited ("NHNL") of a dispute regarding its ownership in NHNL and therefore its interest in the Barracuda Field in OML 141. ADM and its legal advisers consider that the dispute brought by NHNL is without merit and ADM confirms there has been no change in its position as the majority shareholder in KONH and the subsequent 70 per cent. indirect interest in NHNL.

The Company and KONH obtained an interim injunction at the Federal High Court of Nigeria, Lagos ("Court") restraining NHNL from selling, disposing, divesting or tampering with the 70% shareholding interest of KONH in NHNL to third-party investors or in any other manner whatsoever.

NHNL applied to the court to set aside the interim injunction order. The Court pronounced NHNL's application as lacking in merit and the application was dismissed.

The Court has since adjourned this matter until 30 June 2022 and the interim injunction remains in place. 

Corporate

The Company has sought to appoint high calibre individuals who will propel the business forward including Oliver Andrews as the new Non-executive Chairman. He replaces Peter Francis who departed due to personal circumstances, and whose contribution to the business was noted and for which the board noted its appreciation. Mr Andrews is the former Chief Investment Officer at the Africa Finance Corporation, one of the largest investment funds in Africa. Over the last 35 years, he has overseen investments of approximately US$10 billion and originated investments deals in natural resources and infrastructure across the continent, worth US$100 billion.

ADM continues to bolster its technical team to advance the Company's existing assets and evaluate new prospects. Dr Babatunde Pearse was appointed as Chief Engineer for the Aje Field Development Plan to oversee both the next phase of development at Aje and the FEED ("Front End Engineering Studies"). Dr Pearse is an industry veteran with an extensive background with International Oil Companies ("IOC"s).

Financial Review  

The financial results of the Group improved markedly on last year as they benefitted from an increased profit interest in the Aje Field, and the oil price recovered in the context of a somewhat abating Covid crisis. Also, the Group successfully completed the acquisition of a controlling indirect interest in the Risk Sharing Agreement for the development of the large-scale Barracuda Field in OML 141.

Revenue and profit

For the year ended 31 December 2021, the Group's revenue increased by 125% to £1.8 million (2020: £0.8 million). The higher revenue reflects the better oil price environment for the two liftings which were completed in April and October 2021 for a total gross production of 457,379 bbls with a net share of 49,099 bbls for ADM.

Operating costs increased by 36% to £1.9 million (2020: £1.4 million) as certain temporary cost-cutting initiatives taken by the Aje partnership in 2020 to mitigate the impact of low oil prices, were reversed as a response to a much better commodity pricing environment.

Decommissioning provision amounted to £1.3 million (2020: £1 million).

Depreciation & amortisation expense decreased by 45% to £0.05 million (2020: £0.09 million) reflecting the lower value of ADM's interest in Aje after an impairment was recognised in 2020 to reflect the recent Petronor/Panoro transaction.

Administrative expenses decreased by 12% to £2.3 million (2020: £2.6 million) remaining at a relatively high level and reflecting high M&A evaluation activity, as well as the costs related to the completion of the Group's acquisition of a controlling indirect interest in the Barracuda Field RSA.

Finance costs decreased by 16% to £0.06 million (2020: £0.07 million).

As a result, the loss after taxation decreased 64% to £2.5 million (2020: £6.9 million loss). The Directors do not propose a dividend (2020: £nil).

Cash flows and liquidity

After adjusting for the conversion of warrants issued in settlement of fees and working capital movements, cash flow loss from operating activities increased by 40% to £2.1 million (2020: £1.5 million loss).

The £2.7 million owed to the Aje JV has this year been accounted for in non-current liabilities rather than in current liabilities.  The liability will be repaid in due time out of Aje production cash flows.

During the period, the Group raised additional equity of £1.7 million in two fundraisings. In March 2021, the Group raised £1,220,000 of equity for general working capital purposes. In November 2021, the Group raised £475,000 of equity also for general working capital purposes.

As of 31 December 2021, the Group had cash and cash equivalents of £110,000 (31 December 2020: £30,000).

Post period, in January 2022, the Company announced an equity fundraising of approximately £561,000 with Optima Resources Limited.

Funding and disposals

The Company raised a total of approximately £1.7 million in two fundraisings in 2021. In March 2021, ADM completed an oversubscribed fundraising raising £1,220,000 before expenses and a further £475,000 raised in November 2021, including a subscription from Directors. In addition, post period, the Company announced an equity fundraise of approximately £561,000 with Optima Resources Limited.

In May 2021, the Company completed the sale of 188,778 shares in Superdielectrics for a total consideration of £849,501, a profit of £656,000 and an increase in value of approximately 340% on ADM's original investment of £199,875 in 2017 and 2018. The proceeds of the sale, together with the above fundraises, have been used to support ADM's growth strategy.

Outlook

The Company considers the progress it has made in 2021 provides an excellent platform for growth. In Aje, ADM has an interest in a high-quality asset with scope for significant increase in production. PetroNor coming on board is a great endorsement of Aje's potential and if, as is expected, PetroNor completes the formalities of the acquisition, it adds a heavyweight partner that will be keen to extract further value from the asset. It will enable the partners to progress the Field Development Plan and significantly increase production at a time when new supplies of oil and gas are increasingly needed around the world.

Alongside Aje, Barracuda took a major step forward with the completed CPR which showed Barracuda has the potential to be prospective for development. In 2022 the Company will continue further work and analysis to help further understand the assets potential before making an investment decision.

With Aje and Barracuda progressing, there remain opportunities for ADM, with its expertise, deep network and access to capital with strong relationships with majors such as Trafigura, to add additional high-quality assets to its investment portfolio. The Company considers it is well placed to take advantage of a market whereby International Oil Companies are in the process of extensive divestment programmes and, in line with the Group's strategy, ADM will continue to seek out assets in West Africa at attractive valuations with substantial upside for shareholders. In addition, and as part of its investment strategy, ADM remains open to potential renewable energy investments, primarily in Europe, if there is an opportunity to bring additional value to shareholders.